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Lessons for Detroit in a City’s Takeover

Louis H. Schimmel, the emergency manager for Pontiac, Mich., and his predecessors have nearly erased all of its long-term debt.Credit
Stephen McGee for The New York Times

PONTIAC, Mich. — The mayor here has no decision-making power. The City Council still holds meetings every Thursday night, though no official business can be conducted. Afterward, the council members are locked out of City Hall until morning, escorted from the building by a janitor.

As Detroit, a major American city in financial disarray, braces for what oversight by an emergency manager appointed by the State of Michigan may soon mean, one need look no further than Pontiac, a place that has been guided by emergency managers for the past four years. Gov. Rick Snyder’s administration is expected on Thursday to announce an emergency manager for Detroit.

A variety of oversight boards and receivers have stepped in — with mixed results — when the nation’s cities have teetered on the brink of bankruptcy. In Michigan alone, 21 emergency managers have been assigned to save cities and other government entities in the last quarter century, but few places have seen change as sweeping as that in Pontiac.

Unfettered by normal checks, balances and the pressures of getting re-elected, emergency managers here have overhauled labor contracts, sold off city assets and privatized nearly every service Pontiac once provided to citizens. Its police force has been outsourced to the county. Its Fire Department belongs to a nearby township. The city’s payroll, once numbering more than 600 workers, now amounts to about 50 public employees. Even parking meters have been sold. All this, and more cuts may be coming, all on the way to balancing the books.

Some say Pontiac’s sprint toward solvency is attracting new businesses, improving services, saving the city. But while supporters believe emergency managers, unencumbered by political infighting, are freed to make the tough decisions that local governments cannot make on their own, critics consider the entire notion of an outside manager anti-democratic, handing all-encompassing authority over the fate of a place to someone whose sole goal is to cut costs.

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Pontiac's payroll now amounts to about 50 public employees.Credit
The New York Times

If anything, Pontiac’s path — a long, swerving course, of which the final results are not yet fully known — has shown that the effectiveness of an emergency manager may hinge most of all on the individual appointed.

“An emergency manager is like a man coming into your house,” said Donald Watkins, a city councilman. “He takes your checkbook, he takes your credit cards, he lives in your house and he sleeps in your bed with your wife.” Mr. Watkins added, “He tells you it’s still your house, but he doesn’t clean up, sells off everything and then he packs his bag and leaves.”

Pontiac, just 30 minutes north of Detroit, was once a healthy blue-collar city, thriving in the glory days of the American automotive industry as home to manufacturing plants of General Motors and the name of one of its brands. People used to wait to get a seat at restaurants downtown and, for nearly three decades, football fans came from miles around to watch the Lions play in the Silverdome until the team moved into Detroit in 2002.

By then, Pontiac’s slide toward insolvency was under way, plagued by a struggling automotive industry, years of financial mismanagement and a population that has been steadily declining since it peaked at more than 85,000 in 1970. Today, fewer than 60,000 people live here.

“When you wake up in the morning, you can feel the struggle,” said Shelton Martin, a resident, noting boarded-up elementary schools and abandoned homes scattered throughout the city, where a third of residents live in poverty.

In 2009, the same year Pontiac’s jobless rate reached 30 percent, the city’s projected deficit hit $12 million and state officials stepped in, just as they have now in Detroit, and appointed the first of three emergency managers who have run this city ever since.

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The jobs board last week in City Hall in Pontiac, Mich. State-appointed emergency managers have run the city since 2009, privatizing services.Credit
Stephen McGee for The New York Times

Instantly, there was resistance. An early deal that sold the Silverdome, once valued at $22 million, for only $583,000 helped forge a deep distrust of the outside managers. The city’s first two emergency managers each resigned after little more than a year.

Without question, Pontiac is different from Detroit and the experience here may not be easily replicated in a larger city. Detroit, the state’s most populous city, with more than 700,000 residents, has more daunting financial woes and is in a less affluent county.

It remains to be seen how Louis H. Schimmel’s tenure will be remembered. Appointed in September 2011, Mr. Schimmel, the third in Pontiac’s string of emergency managers, quickly unleashed a flurry of privatization deals that even he sounds surprised at having accomplished over the last 18 months.

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A Pontiac native with decades of experience in municipal finance, he was previously assigned to rehabilitate the finances of two other Michigan cities — Ecorse in the 1986 and Hamtramck in 2000.

Mr. Schimmel, now 76, has gutted the Pontiac city government, outsourcing garbage collection, animal control, vital records and street maintenance. Many people still working in City Hall are employed by outside companies.

Together, Mr. Schimmel and his predecessors have slashed Pontiac’s annual spending to $36 million from $57 million and erased nearly all of its long-term debt. Mr. Schimmel wants to cut an additional $6 million from the budget in the next two months.

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Pontiac’s mayor, Leon B. Jukowski, has no decision-making power in the city.Credit
Stephen McGee for The New York Times

While Mayor Leon B. Jukowski has an arrangement of being paid $100,000 as a consultant to Mr. Schimmel, whose $150,000 salary comes from city coffers, Pontiac’s council members have not been involved in the reshaping of their city. They have opposed privatization efforts at every turn.

“You can’t take an attitude other than ‘I know I can make these changes,’ ” Mr. Schimmel said of the political tension.

Some changes have drawn wide approval, including a decision to save $2 million a year by outsourcing the police to the Oakland County Sheriff’s Department. Remembering times when it took Pontiac’s police force hours to respond to calls, residents are quick to point out that the county officers now arrive within minutes.

Beyond the clear cost savings, the fallout from other decisions is murkier. Some residents say they worry that emergency managers have sold off so many of the city’s assets to pay bills in the short term that Pontiac will be dependent on private companies and surrounding communities for years to come.

The city turned over its fire trucks when its firefighters were merged with Waterford Township, a move that saved $3 million a year. It cashed in on excess space in its wastewater disposal system — $55 million worth — but no longer owns the facility. When a parking plan cost the city more than it was making, Mr. Schimmel made all spots in Pontiac free, then sold some meters.

But while vacant houses fill the neighborhoods here, business leaders say Mr. Schimmel’s policies have helped spur renewed investment downtown. Storefronts are now 90 percent full, up from about half in 2010, according to the city’s Downtown Business Association. The group says streetlights have been rewired, new lofts are on the market, and more than 2,000 tulips have been planted in anticipation of spring events.

“Pontiac is getting its heartbeat back,” said Robert Karazim, a new resident who owns apartment and retail space downtown. “It isn’t a ghost town anymore.”

With his work nearly finished, Mr. Schimmel said that he plans to hand Pontiac back over to city officials before summer, just in time for primary elections.

Monica Davey contributed reporting from Chicago.

A version of this article appears in print on March 14, 2013, on Page A16 of the New York edition with the headline: Lessons for Detroit in a City’s Takeover. Order Reprints|Today's Paper|Subscribe